Wednesday, February 9, 2011


No prior permission of Reserve Bank is required to open offices (trading or non-trading) abroad or post representatives abroad by Indian firms/companies.
The Indian firm/companies should submit applications to their bankers (authorized dealers) in form OBR along with the particulars of their turnover duly certified by their auditors and also a declaration to the effect that they have not approached/would not approach any other authorized dealer for the facility being applied for. The application form OBR needs to be filled in with necessary details along with supporting documents.  After which the foreign exchange is released by the authorized dealer (bank).
Foreign Exchange released by the Bank
Authorized dealers may release exchange towards initial expenditure as also for recurring expenses of the office as under, provided the applicant fulfils the following conditions:

Initial Expenditure
Recurring Expenditure (per annum)

EEFC Account(Exchange Earners’ Foreign Currency account)
No limit for remittances out of EEFC funds.
No limit for holders remittances out Of EEFC funds.

Firms/companies not having EEFC accounts or not having sufficient funds EEFC accounts.
Up to 15% of the average annual sales / income or turnover during the last two financial years or up to 25% per cent of the net worth, whichever is higher.
Up to 10% of their average annual sales/income turnover during last two years.

In the case of newly established 100% EOUs or Units in EPZs and Hardware/Software Technology Parks, exchange may be released as per their estimated requirements for initial as well as recurring expenses on verification of suitable documentary evidence during the first two years of their operation. From third year onwards, exchange may be released as per item (a) or (b) above. Thus for first two years such units can get more foreign exchange released than the limits for other Indian companies.

The recurring (expenditure) remittance facilities are allowed initially for a period of two years only, after obtaining confirmation form the applicant that they have completed all legal and other formalities in India and abroad in connection with the opening of trading/non-trading office or for posting a representative abroad. The renewal of remittance facility after two years may be granted provided proper accounts of utilisation of foreign exchange released are furnished to the authorized dealer.
You may note that if you are a new Company you may not be able to get the approval of Authorized Dealer to open offices aboard.
The general terms and conditions for opening the offices abroad normally are:
  1. The overseas office should not create any financial liabilities contingent or otherwise for the head Office in India.
  1. Exchange released by the authorized dealer should be strictly utilized for the purpose(s) for which it is released. They unused exchange may be repatriated to India under advice to the authorized dealer.
  1. The details of bank account opened in the overseas countries should be promptly reported to the authorized dealer.
  1. The approval granted for the purpose should be made valid for 6 months from the date thereof, within which time the applicant should open its overseas office or post representative abroad. In case the overseas office is not opened or the representative is not posted abroad within this period, intimation in writing to the effect should be sent to the authorized dealer immediately after expiry of 6 months period. Fresh application for release of exchange should be submitted to the authorized dealer as and when the overseas office is desired to be opened.
  1. Profits, if any, earned by the overseas office/s should be repatriated to India.
  1. The following statements should be submitted by the applicant to the authorized dealer:
    1. A statement showing details of initial expenses incurred together with suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.

    1. Annual account of trading/non-trading office abroad duly certified by statutory Auditors/Chartered Accountants.

Temporary Site/Project Offices Abroad
Indian firms/companies executing contracts/projects abroad with the approval of the appropriate authority are permitted under a general permission granted by Reserve Bank to set up site/project offices abroad provided that such offices are maintained out of project receipts and remittances from India are not required. These offices are required to be closed down and surplus foreign exchange earnings repatriated to India after completion of the project.
Credit facilities for overseas trading offices of Indian companies
Reserve Bank considers, on merits, request from Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses to avail of fund based/non-fund based facilities for their trading offices abroad from overseas banks. Application in such cases should be made to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Export Division), Mumbai together with full particulars of the exchange facilities availed of for maintenance of the overseas office concerned, full details of terms and conditions subject to which the facilities are being extended by the overseas bank and the need for availing of the credit facilities by the overseas trading office.
Application for permission to post a representative 
Establish office/branch overseas
·         The application is to be made in form OBR to the Bank with supporting documents.
·         The estimates of foreign exchange expenditure should be given in units of foreign currency and the appropriate rupee equivalent furnishing the exchange rate applied.
Documents to be submitted along with the Form OBR
Correspondence, if any, in original together with photocopies regarding the arrangement made in foreign country for posting of representative/establishment of branch/office.
Bank certificates, in form BCX (certificate of export), together with photocopies thereof for the immediately preceding four calendar half years in support of export realizations.




  1. Dear Readers,

    If you need further info or clarification on the subject, please revert to me at



    1. Dear Mr Seckar,

      I have gone through your article on limit of remittances to be sent abroad for setting up branch outside India

      Can you please clarify, what are the present limits or percentage of Turnover which can be sent abroad for setting up foriegn branch.Since as per RBI site, it is reflected as 1% & 2% as per following link :-


      CA Amit Mittal

  2. As per My knowledge,
    The recurring expenditure remittance limit is 5% and of Initial expenditure, it is 10%.
    Please clarify

  3. Dear Sir,

    need your view on below construction

    we understand that requirement of submitting OBR and getting approval of opening of office abroad was notified under ECM issued under FERA 1973 (amended by FERA 1993)

    on May 16, 2000, rbi issued circular no AD(MA series) 11 which clearly notifies that FERA is repealed and is replaced by FEMA.

    AD MA 11 serves as master document for all foreign exchange related guidelines under FEMA.

    This circular is silent on the matter of opening of overseas offices but classify opening of bank account in the name of oveseas office as allowed capital account transaction for certain class of indian entities (amended from time to time).

    so conclusion is with repeal of FERA, ECM and its requirements for submitting OBR is not applicable and offices can be opened freely overseas. however any bank account opened overseas should be notified to AD promptly.

    Also these is no need to have any specific AD for routing transactions of overseas offices nor there is any requirements of taking NOC from first AD id corporate wants to route remittances related to overseas offices thru other AD.

    your views on it pls...!!

  4. Hello all,

    What are the avenues open to a new Indian company that wants to open an R&D center in California which will employ local persons (US citizens, PIO/OCI holders, etc.)? The salient facts are

    (i) company does not have any revenues as yet,

    (ii) company does not foresee any meaningful revenues for next 12-18 months,

    (iii) company is wholly Indian but the promoters have mixed nationalities, and

    (iv) company headcount is expected to remain below 25 for next 12 months.

    While initial expenses for an R&D center in the US are modest, the recurring cost (of payroll) will be substantial. It appears from the preceding comments that obtaining USD funds is going to be difficult.

    I will appreciate your comments and any relevant references.

    Thanks a lot.

  5. Hello All,

    Authorised representative referred here is for the Bank account only or for overall purposes.

    Also can we appoint a Foreign citizen, who is employee of one of the group entity, without any salary from Indian Company as Authorized Representative here?

    thanks a lot

  6. is the process same on date or are there any amendments Sir?